The parameter \(\beta \)  shows market exposure, how much risk the portfolio is exposed to because of fluctuations in the benchmark. The parameter \(\alpha \)  shows excess return, how much can one earn from this portfolio on top of this market return. They are often called by their Greek names: beta and alpha. The residual \(\varepsilon (t)\)  is called unsystematic risk which can be eliminated by diversification. According to the CAPM, \(\alpha = 0\)  and the only risk which deserves rewards is the systematic risk (due to market exposure) since other risk can be diversified away. The CAPM was proposed in the classic article [1]}. Subsequent research cast doubt on the consistency of CAPM with actual market data. In particular, [2]} found that taking a portfolio of small stocks generates positive \(\alpha \) . That is, small stocks have higher returns than large stocks even after adjusting for market exposure (which is greater than 1 for small stocks). Subsequent classic article [3]} confirmed this. Further research on the size effect can be found in [4]} and [5]} and references therein. See also critique of CAPM in [6]}.
